Arrowhead published an Equity Research Report on Suvo Strategic Minerals Limited
February 25, 2024
Suvo Strategic Minerals (ASX: SUV) Research Initiation
Arrowhead is initiating coverage on Suvo Strategic Minerals Limited (Suvo or SUV or the company) with a fair value bracket of AUD 0.10 to AUD 0.18 per share (share price on February 23, 2024: AUD 0.036) derived using a Sum of Parts (SOP) methodology.
Report Highlights:
- Suvo is Australia’s only hydrous kaolin producer, with operations based in Pittong, Victoria. The company is also engaged in exploring near-term kaolin and high-purity silica assets with wholly owned Gabbin (kaolin), Eneabba and Muchea (silica sands) projects located in Western Australia.
- The company’s core operations are located at its Pittong facility. In January 2021, Suvo acquired the Pittong processing plant from the French multinational, Imerys S.A for AUD 3 mn. The Pittong deposit also holds a mineral resource base of 3.74 metric tons (Mt) of indicated and 1.97 Mt of inferred resources, located only 2km from the processing plant.
- In February 2023, SUV completed the upgrade and modernization of the Pittong plant by investing AUD 5 mn in restoring its name-plate processing capacity of 60,000 tonnes per annum (tpa). Following the upgrade, the plant was run continuously over five days, achieving a production output of over 1,000 tonnes. This validates the company’s ability to ramp up its annual sales to 50-60kt based on demand for the output.
- Suvo produced ~18kt of hydrous kaolin in FY 2023, generating a revenue of AUD 11mn. It aims to operate the plant at its full capacity by FY 2026.
- In H2 2023, Suvo appointed three key sales and distribution personnel in South-East Asia to boost the sales of its kaolin output. These personnel bring on board more than 60 years in the kaolin space and have worked for large companies and clients in industries such as paints, ink, rubber, plastics and paper. Further, the company has appointed several established global chemical distribution companies throughout Asia to provide expertise and distribution networks, ensuring efficient product delivery and local stock availability.
- In February 2024, Suvo raised AUD 2.5 mn from the issue of 83.33 mn shares in a placement and up to AUD 1 mn (33.33 mn shares) under a share purchase plan (on the same terms as the placement) to ramp up Pittong production and to support research and development (R&D) activities to advance geopolymer concrete.
- The company has received purchase orders from four new customers with an annual demand of ~630 tonnes, generating additional revenue of AUD 0.43 mn.
- Suvo owns the Trawalla kaolin deposit (MIN 5365), which is located only 23 km from the Pittong processing facilities. MIN 5365 has a total indicated and inferred JORC-compliant mineral resource estimate (MRE) of 12.7 Mt of kaolinized granite, yielding 3.5 Mt (saleable) of <45µm bright white kaolin with bleached ISO brightness of 83.7. The company holds all permits and licenses but has yet to start mining activities at this greenfield mine site.
- The company also owns two projects that are currently in the exploration stage:
- Gabbin Kaolin Project: The project, located 15km northeast of Perth, Western Australia, is at the pre-feasibility study stage with a total MRE (indicated & inferred) of 72.5 Mt of kaolinized granite.
- Eneabba Silica Sands Project: The project, located 300km north of Perth, Western Australia, is at scoping study level with further drilling required to extend and increase the resource base of 216Mt.
- In October 2023, the company signed an intellectual property (IP) agreement with Murdoch University for a geopolymer concrete batching plant and low-carbon concrete formulation ‘colliecrete’. In January 2024, Suvo was invited by the Sustainability Waste Alliance (SWA) to complete the demonstration pour of colliecrete on a section of the Bunbury Outer Ring Road Project, the largest road infrastructure project in the history of the South-West of Western Australia. If the demonstration is successful, it can present the opportunity to use colliecrete on other government infrastructure projects.
- The company signed a non-binding memorandum of understanding (MoU) with PERMAcast to further develop end-user applications for its licensed intellectual property (IP), low-carbon concrete.
- In November 2023, SUV hired German thermal processing specialists IBU-tec Advanced Materials AG (IBU-tec) for lab-scale testing for its hydrous kaolin to produce calcined kaolin, which is generally sold at a 20-40% premium to kaolin.
- Suvo also commenced lab-scale trials for blending 10%, 20% and 30% ground calcium carbonate (GCC) with Pittong’s hydrous kaolin to increase the production of saleable products beyond the current capacity of 60k tpa.
- The company is listed on the Australian Securities Exchange (ASX) under the ticker SUV.